March Market Update

Update on Foreclosures from the CAR President

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®


October 12, 2010

Dear C.A.R. member,

No doubt you’ve heard the news recently that a number of major banks have volunteered to temporarily suspend foreclosures in 23 states and Bank of America is temporarily suspending foreclosures nationwide.

While this situation is changing daily, I want to tell you what we currently know to answer any questions you may have.

In late September and early October some lenders and servicers began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes.

So far, only Bank of America has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order. Foreclosures in the other 23 states are processed through the court system.

Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow. For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default. Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).

The lenders and servicers that have placed their foreclosure moratorium on properties in the 23 states where courts are involved in the foreclosure process include: Goldman Sachs Group Inc’s Litton Loan Servicing, Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase, and PNC Financial.

These lenders/servicers have only temporarily halted their foreclosures while they review their foreclosure process. This is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.

This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government.

Some members have begun to report the immediate impact of this moratorium on transactions that involve foreclosed properties. Delays in escrow and the removal of listed foreclosures are temporary results of this moratorium.

The immediate impact on the market will be the slowing of home sales, which could put upward pressure on home prices in the short term. The long-term effect on the market is uncertain at this point as it depends how long the moratorium remains in place.

Assuming the moratorium is lifted in the next month, the flow of REOs to the market should resume, but the uncertainty created by the moratorium may cause hesitation on the part of buyers.

Federal agencies, including the Office of the Comptroller of the Currency, the Federal Housing Administration, and the conservator of Fannie Mae and Freddie Mac, have asked lenders and servicers to review their foreclosure processes. This review would apply to all states including those like California where the vast majority of foreclosures are non-judicial.

The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.
NAR has sent a letter to regulators expressing their concerns over the foreclosure issue. Please visit www.realtor.org/foreclosure for the latest developments and additional information.

C.A.R. is supportive of lenders taking action to ensure homeowners are not improperly foreclosed on and that they are following state law. We hope they are able to conduct their review expeditiously so as to minimize the impact on California’s housing market.


Sincerely,

Steve Goddard
2010 President
CALIFORNIA ASSOCIATION OF REALTORS®

Fourth quarter housing affordability

C.A.R. reports entry-level housing affordability remained at 64 percent in the fourth quarter of 2009

Quick Facts:
. C.A.R. First-time Buyer Housing Affordability Index stood at 64 percent in the fourth quarter of 2009
compared with 61 percent (revised) in the fourth quarter of 2008
. The median price of an entry-level home in California was $257,940 in the fourth quarter of 2009
. The estimated monthly payment including taxes and insurance was $1,470 in the fourth quarter of
2009
. The minimum household income needed to purchase an entry-level home in California in the fourth
quarter of 2009 was $44,100.

LOS ANGELES (Feb. 12) The percentage of households that could afford to buy an entry-level home in California remained at 64 percent in the fourth quarter of 2009, compared with 61 percent (revised) for the same period a year ago, according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.

The minimum household income needed to purchase an entry-level home at $257,940 in California in the fourth quarter of 2009 was $44,100, based on an adjustable interest rate of 4.5 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,470 for the fourth quarter of 2009.

At $44,100, the minimum qualifying income was 4 percent lower than a year earlier when households needed $45,900 to qualify for a loan on an entry-level home. Home prices remained below peak levels, resulting in an improvement in housing affordability compared with the previous year.

At 84 percent, the High Desert region was the most affordable area in the state. The San Luis Obispo County region was the least affordable in the state at 48 percent, followed by the San Francisco Bay region and Santa Barbara area both at 50 percent.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 167,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Source: CALIFORNIA ASSOCIATION OF REALTORS^®

^{Berkeley Hills Realty notes: Our market is highly localized. For East Bay specific data, contact your Berkeley Hills Realty agent.}

^{Click here to access housing affordability tables.}

C.A.R. releases California Housing Market Forecast for 2010

“What is happening to the real estate market?” This is the burning question on every homeowner or would-be-homeowner's mind. California just got an answer. The California Association of Realtor's just released its 2010 California Housing Market Forecast. The new report sounds cautiously optimistic:

“After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,” said C.A.R. president James Liptak. “2010 will mark the beginning of the ‘new normal’ for California’s housing market. This ‘new normal’ likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation."

Consistent with our last Market Update for East Bay Real Estate, Liptak adds that our California housing market continues to be "a tale of two markets."

“The low end continues to attract first-time buyers and investors, with a resulting shortage in the number of homes for sale. Sellers at the high end, however, continue to be challenged by the ability of home buyers to secure financing as well as their concerns about where prices are headed.

Leslie Appleton-Young, C.A.R. Vice President and Chief Economist, also shares her Market Forecast power point presentation developed for the California Realtor Expo.

“The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government,” Appleton-Young said.